Scottish Court of Session Decisions

The cause called before the Second Division, comprising the Lord Justice-Clerk (Cullen), Lord Kirkwood and Lord Coulsfield for a hearing on the summar roll.

At advising, on 20 February 1998, the opinion of the court was delivered by the Lord Justice-Clerk (Cullen).

OPINION OF THE COURT—On 1 February 1991 judgment was given against the pursuer in an action at his instance against Fennoscandia Bank Limited, the former name of Fennoscandia Limited, to which I will refer as ‘the defenders’. This action was in the United States District Court for the District of Delaware. The pursuer had sought to establish that there had been a conspiracy between the defenders and certain businessmen in order to deprive the pursuer of the office of president of a company known as DRX Inc. On 23 March 1992 the pursuer's appeal was refused by the United States Court of Appeals for the Third Circuit. Costs were awarded against the pursuer in both courts. Thereafter the pursuer took proceedings to have the judgment against him set aside on the ground that it had been obtained by fraud. This was based on a claim that an executive director and an in-house counsel of the defenders had committed perjury at the trial. The court in Delaware determined that the evidence in support of this claim was not sufficient as a matter of law to establish fraud on the court. As a result the pursuer's challenge was dismissed on 30 December 1994. The proceedings in Delaware have been exhausted.

In 1993 the defenders sued the pursuer in the District Court, City and County of Denver, State of Colorado for sums totalling just under 11 million Canadian dollars. The pursuer relied on the same allegations as in the Delaware action. The court in Denver decided that since the same issue had been litigated and decided in Delaware, the pursuer was estopped from pleading that defence. Judgment against the pursuer was pronounced on 11 July 1996. Pending the outcome of the pursuer's appeal against that judgment the defenders are entitled to do diligence on it.

In February 1994 the pursuer and another raised an action in the High Court in England seeking, inter alia, damages for breach of contract and/or misuse of confidential information and/or negligence. On 24 December 1994, on the motion of the defenders, the pursuer's statement of claim was struck out on the basis of issue estoppel, in respect that at its heart lay the same assertions of fact as had been the subject of determination in the action in Delaware. Appeals to a judge of the Queen's Bench Division and to the Court of Appeal (Civil Division) were refused. Costs were awarded against the pursuer. Leave to appeal to the House of Lords was refused. The orders for payment of costs, apart from that relating to the Court of Appeal, have not been satisfied.

In this action the pursuer seeks in terms of the three conclusions of the summons, firstly, decree of declarator that the judgment of the court in Delaware dated 1 February 1991 was obtained through fraud; secondly, interdict against the defenders enforcing the judgment of the court in Denver dated 11 July 1996; and, thirdly, interdict ‘against the defenders from taking any steps to enforce against the pursuer by way of bankruptcy or other proceedings against him in Scotland, the taxed costs together with interest thereon allowed by Taxing Master Wright by order dated 14 March 1997 in the action Robert Anthony Clarke and Alexander Claims Trust (a Trust) case No 1994A number 500 in the High Court of Justice, Strand, London’. In each case he also concludes for interdict ad interim.

On 22 December 1997 the Lord Ordinary refused the pursuer's motion for interim interdict in terms of the second and third conclusions. The pursuer has reclaimed against that interlocutor, but the reclaiming motion is confined to the refusal to grant interim interdict in terms of the third conclusion.

It should also be noted that in this court there is another action in which the defenders have sued the pursuer for decree conform in order to enforce the judgment in their favour for costs in the District Court in Delaware. In that action the pursuer's defence is that judgment against him was obtained through a fraud on that court. By agreement between the parties this action is to be the subject of proof before answer later in this year.

Counsel for the pursuer submitted that fraud on the court in Delaware had been perpetuated by the defenders' reliance in other courts, such as the English court, on the judgment which they had obtained there. Thus when the defenders pleaded issue estoppel in England they again obtained judgment through the same fraud. The order for costs in the English court was accordingly ‘tainted’. Counsel also criticised the reasoning in the Court of Appeal. What the pursuer sought to rely on was evidence which was not merely relevant to his own credibility but was in direct opposition to the evidence which had been given by the two officials of the defenders. This presented the court with an absolute choice. However, it was not contended that the English courts had acted oppressively. The contention was that, in seeking to enforce the order for costs which had been obtained on the basis of the judgment in Delaware, the defenders were acting oppressively.

The Lord Ordinary stated that he could not on any view see a basis for contending that it would be a wrong against the pursuer or a violation of his rights for the English order to be enforced against him. The English court had decided that, even if the pursuer established all that he offered to establish, this did not provide a basis in law for holding that the judgment in Delaware had been obtained by a fraud on the court. The Lord Ordinary held that even if the pursuer were successful in showing in the other action in the Court of Session that the judgment in Delaware should not be enforced, it would not follow that the order for costs in the English proceedings would be unenforceable.

Counsel did not maintain that in approaching the question of interim interdict the Lord Ordinary had applied the wrong test. However, he had failed to recognise the real risk of irreparable harm to the pursuer. This harm was of a type which the Scottish courts had power to prevent. The court should exercise that power, at least ad interim,pending the determination in Scotland of the question whether the pursuer's case that the judgment of the court in Delaware had been obtained by fraud on that court was well founded. The wrong to the pursuer was made worse by the fact that he had obtained the right to inquiry into his defence to the defenders' action for decree conform. Counsel pointed out that the Lord Ordinary had expressed the view that for present purposes he was prepared to accept that the pursuer might be able to demonstrate that a fraud had been perpetrated on the court in Delaware. If the pursuer was allowed to proceed with his defence to that action he might be able to show that the English order was ‘tainted with fraud’. However, if interim interdict was not granted in the present action, a trustee in sequestration might decline to proceed with that defence, to the prejudice of the pursuer. This court should assist the pursuer to prevent the defenders gaining from their fraud. It was well recognised that a Scottish court could act to prevent the execution of the order of another court (cfBoe v Anderson per Lord President McNeill at p 32). Likewise in England the common law denied finality to a foreign judgment if it could be shown to have been obtained by fraud, whereas in the case of an English judgment the fraud required to be established by fresh evidence which had not been available to the defendant at trial and could not with reasonable diligence have been discovered by him before that judgment was delivered (Owens Bank Ltd v Bracco per Lord Bridge of Harwich at p 489). The Lord Ordinary had fallen into error in assuming that the English court had considered all the evidence which the pursuer could offer. The pursuer was in a position to lead the evidence of two additional witnesses. Their written evidence had been before the English court but they had not given oral evidence there. Further he was able to rely on two draft letters which did not form part of the process in the proceedings in Delaware and which provided support for the view that there was nothing underhand in any financial arrangement between the pursuer and a witness on whom he relied in showing that the two officials had given perjured evidence.

Counsel for the defenders submitted that the pursuer had not demonstrated that he had a prima facie case for interim interdict. This depended in the first place on whether such proceedings were prima facie competent. The pursuer averred that he was apprehensive that the defenders might take one or other of a number of courses of action against him in order to enforce the English order for costs.

Firstly, the defenders could seek to register the English order in Scotland under sec 18 of, and the sixth schedule to, the Civil Jurisdiction and Judgments Act 1982. However this legislation effectively excluded the courts in England and in Scotland from interfering with a judgment made in one country which was to be registered in the other. Thus in terms of para 9 of the sixth schedule, the Scottish court could only sist proceedings for enforcement while the party against whom enforcement was sought pursued his application in the other country to set aside or quash the judgment. (Anton & Beaumount on Civil Jurisdiction in Scotland, 2nd edn p 241; and Dicey & Morris on Conflict of Laws 12th edn p 544). For the pursuer to seek interim interdict against the enforcement of the English order for costs, on the ground that it had been based on a fraud, involved an attempt to circumvent these provisions.

The second course of action was by the defenders seeking to have the pursuer rendered bankrupt in England, and on that basis establish his apparent insolvency for the purposes of his sequestration in Scotland, under sec 5(2)(b) and sec 7(1)(a) of the Bankruptcy (Scotland) Act 1985. Alternatively the defenders could seek his sequestration in Scotland on the basis of his failure to pay in response to a duly executed charge for payment. There was no suggestion that either of these courses of action would not be in accordance with the terms of the 1982 Act. In any event if the defenders sought to proceed in this manner the pursuer could invite the court to refuse or to recall his sequestration pending any further action against the defenders in England.

Where allegations of fraud had been made and determined abroad, the English courts took the view that summary judgment or striking out in subsequent proceedings were appropriate remedies in the absence of plausible evidence disclosing at least a prima facie case of fraud, as was shown in Owens Bank Ltd v Etoile Commerciale SA. In the present case there was no averment of conspiracy or of subornation of perjury. Fraud required to be averred in detail. All that the pursuer averred in the present action was that the two officials had committed perjury. However, it was clear that that was itself insufficient to establish that the judgment in Delaware had been obtained by the perpetration of a fraud on the court. Counsel went on to submit that, even if the pursuer were successful in his defence to the action for decree conform, this would not necessarily affect the order which had been made in England.

Counsel added that the ‘harm’ to which the pursuer's counsel referred could have been eliminated by the pursuer making payment in accordance with the English order. His liability arose out of his unsuccessful attempt to resist the action. As regards the action for decree conform, there was no question of the court deciding that there should be inquiry by way of proof before answer. It was also incorrect that the evidence contained in the draft letters was only now available. Lastly, he submitted that it was not appropriate in any event for the court to exercise its power to pronounce interim interdict, having regard to the fact that the pursuer had an alternative remedy, the lack of prospects of success in the action, and the fact that if the defenders were interdicted they would be deprived of their normal right to arrest or inhibit.

We consider that the defenders' challenge to the competence of the proceedings for interdict is formidable. As regards the enforcement of the English order for costs by means of a procedure for registration under the Civil Jurisdiction and Judgments Act 1982, it is clear that a Scottish court is not entitled to review the judgment which is sought to be enforced. In any event there is no question in the present case of the English order being incompetent or incorrect on its merits. Counsel sought to avoid the difficulty created by the restriction on the powers of the Scottish court by arguing that all that the pursuer was seeking to do was to prevent the defenders from making application under the 1982 Act. However, this fails to meet the point that the pursuer's action is directed to denying enforcement of a judgment which is registrable under the Act, not on the basis that enforcement should be suspended pending further proceedings in England but on the ground that, having regard to the evidence upon which the pursuer founds, the Scottish court should reach the conclusion that the English judgment was affected by the original fraud in Delaware. In these circumstances the pursuer effectively seeks to circumvent the restrictions imposed by the 1982 Act. As regards the steps which the defenders may take with a view to the sequestration of the pursuer in Scotland there is no suggestion that, given the order of the English court, the defenders would not be entitled to proceed in one or other of the ways which were described. The pursuer's objection relates to the order which would form the foundation or starting point for such steps. Once more the difficulty for the pursuer is that he cannot invite a Scottish court to set aside the English order without falling foul of the restrictions imposed by the 1982 Act. In these circumstances we are satisfied that the pursuer is unable to provide a prima faciebasis for interim interdict to prevent the enforcement of the English order for costs.

We should add that we find no necessary inconsistency between the refusal of interim interdict and the fact that the action for decree conform is proceeding to proof before answer. The latter action is not concerned with the liability of the pursuer under the order of the English court but with the original judgment in Delaware. If the pursuer is successful in this defence to that action this may or may not provide him with a justification for making a further application to the English court. However, that is not a matter on which we are competent to pass any opinion. In any event it is hypothetical.

In the circumstances it is inappropriate and unnecessary for us to make any comment in regard to the sufficiency of the pursuer's averments in so far as they form the basis for the claim that the judgment in Delaware was obtained by means of a fraud on the court, or to assess the extent to which the pursuer is at present able to adduce evidence which was not heard in Delaware or in England. Further it has not been necessary for us to make an assessment of the balance of convenience. That would have arisen only if we had been satisfied that the pursuer had made a prima facie case for interim interdict, but, as we have already indicated, he has not.

In these circumstances we will refuse the reclaiming motion and adhere to the interlocutor of the Lord Ordinary.